In Booming Japan, the Phillips Curve Is Dead

TOKYO—Standard models of the economy are built on a simple relationship: When unemployment goes down, inflation eventually goes up. That relationship, dubbed the Phillips curve, has looked sickly for years. In Japan, it may be dead, a preview of what central bankers may confront everywhere.

Japan, uncharacteristically, has been booming. Output grew 1.9% last year and, despite a first-quarter contraction, should grow more than 1% this year. That doesn’t sound like much but it’s actually faster than Japan’s long-term growth...